IBM, HP, Dell Show Healthy Growth in Server Market

Worldwide revenues in the computer server market showed strong growth in the first quarter, as leader IBM and the other top vendors held on to their positions, a market research firm said Wednesday.

The overall market increased by 4.1 percent in the quarter to $12.3 billion from $11.8 billion in the same period a year ago, Gartner Inc. said. Growth was primarily driven by sales of x86 servers, which make up about half of the market.

Q1 growth this year, however, was less than last year, when revenues increased by 9.3 percent over 2003, Gartner said. The increase last year was primarily due to many companies replacing servers bought in 1999 and 2000. The popularity of blade servers also helped drive the market.

Nevertheless, "the numbers (in Q1 2005) are still pretty strong in comparison to where they've been," Gartner analyst Michael McLaughlin said. "This is solid, healthy growth in the server market."

In comparison, first quarter revenues in 2002 and 2003 saw a 16.9 percent drop and an increase of only 1 percent, respectively.Revenues for the full year of 2005 are expected to increase by 5 percent, according to Gartner.

Among the vendors, IBM held on to the top spot, despite a nearly 1 percent drop in market share to 29.8 percent. No. 2 Hewlett-Packard increased its market share to 28.1 percent from 25.9 percent a year ago, and third-place Dell strengthened its position by boosting revenues nearly a percent to 10.8 percent.

No. 4 Sun Microsystems held on to number four despite a dip in market share to 9.5 percent from 10.3 percent. Fifth-place Fujitsu/Fujitsu Siemens's share was nearly flat at 7.2 percent.

"There were no surprises at all," McLaughlin said of the vendors' performance.

IBM is expected to remain the revenue leader in 2005, picking up sales in the second half of the year, McLaughlin said. Companies usually buy IBM's high-end computers, a major source of its revenues, later in the year, after they finalize budgets.HP and Dell, on the other hand, led in low-end, x86 computers. HP was No. 1 with $2.1 billion in revenues in the quarter, or a 34.3 percent market share, up about 2.5 percent from a year ago. Dell followed with $1.3 billion, or a 22 percent share, followed by IBM with $975.3 million, or 16.2 percent.

Overall revenues from Linux-based servers increased by about 40 percent in the quarter, to $1.5 billion, Gartner said.

"Linux server revenue didn't grow as fast as I though it would, but it's still pretty healthy," McLaughlin said.

Linux has been so successful over the last several years that overall revenue growth would eventually start to slowdown, McLaughlin said.

"I don't think it's going to come to a standstill, but there was so much growth that people are now catching up in terms of its use," the analyst said.IBM led the Linux market in revenue with a 28 percent market share, followed, in order, by HP, 23 percent; Dell, 17 percent; SGI, 3.7 percent; and Fujitsu/Fujitsu Siemens, 3.4 percent.

Revenues from blade servers jumped more than twofold to $426.3 million in the quarter from $208.7 million a year ago, Gartner said. IBM led the space, while HP fell to No. 2, followed by Sun, Dell and Fujitsu/Fujitsu Siemens.

In terms of operating systems, Windows servers accounted for 35 percent of overall revenues, Unix 33.8 percent and Linux 9.1 percent. All other OSes accounted for the remainder.